Entries for March 2013

Whatever you do, don’t collaborate with your supply chain planning peers. No need to share information about inventory levels, customer orders or transportation woes. And definitely don’t try to predict sales out into the future, because there’s just no evidence that it’s a worthwhile endeavor.

OK, I didn’t think you’d agree with that. If nothing else, the previous paragraph was an unexpected swim against the current of overwhelming support for doing the exact opposite. Of course you should be collaborating. Of course you need to share information upon which critical supply chain planning decisions are made. Of course you should be doing everything possible to plan out as far as it is practical with as much accuracy as possible. And of course you should be leveraging advanced planning and optimization technologies to help create highly profitable operating plans. Why? Because it’s your best defense against the supply chain planning risk and unpredictability that is here to stay.

A recent survey from Deloitte shows that global executives are increasingly concerned about the growing risks to their supply chains and costly negative impacts, such as margin erosion and inability to keep up with demand. Of the 600 executives surveyed, most converged on the need for a strong risk management strategy to mitigate the impact of ever-present disruptions. Yet, an alarming 45% of the surveyed executives said their supply chain risk management programs are only somewhat effective or not effective at all. And the number one reason why their supply chain risk management programs are not successful: “lack of acceptable cross-functional collaboration.”

Despite strong evidence from all corners of supply chain outlining the benefits of collaboration, including increased visibility, flexibility and control, many companies continue to struggle to achieve an effective level of collaboration across the enterprise. They continue to operate in an array of information silos, preventing the creation of a true picture of the current state and future outcome of the current supply chain operating plan. Look deeper into the Deloitte survey results and you’ll find that “current tools and limited adoption of advanced technologies are often constraining companies’ ability to understand and mitigate today’s evolving supply chain risks. Although many of the surveyed executives report using a wide range of tools to manage risk, only 36% use predictive modeling and less than one-third (29%) use risk sensing data, worst case scenario modeling, or business simulation—tools that can help drive more proactive management of supply chain risk.”

With many advancements in supply chain software over the last decade, it is surprising that companies continue to struggle in these areas. Triple Point’s Supply Chain Optimization solution has been helping process manufacturers achieve enterprise-wide collaboration enabling tactical and strategic supply chain planning for over twenty years.

Just a few years back, there were many articles discussing “Peak Oil” and whether the world had already passed the peak. A typical headline was one in Fortune Magazine in 2008 with a headline predicting a dramatic increase in oil prices – “Here comes $500 oil.”

At the recent HIS CERA Week, it was reported that “Peak Oil” was already a distant thought for most presenters, and that much of the talk was about growth in natural gas and oil from unconventional shale resources in the U.S.

According to the U.S. Energy Information Administration (EIA), crude oil production in the U.S. exceeded an average seven million barrels per day (bbl/d) in November and December of 2012, the highest volume since December 1992.

The International Energy Agency (IEA) predicts that the United States will overtake Saudi Arabia and Russia to become the world's leading oil producer by 2017.

The WSJ MarketBeat Blog notes we are only at the beginning. “U.S. tinkerers discovered a way to extract oil and gas from shale, the source rock for oil and gas that was previously deemed uneconomical. That has boosted U.S. production to levels not seen in two decades, and that’s only the beginning: shale recovery factors could improve, and vast shale formations in Argentina, China, Russia and other countries are yet to be tapped. If technology ever allows the industry to recover 70% of oil from conventional reservoirs and to double or triple the current recovery rate from unconventional resources, the world could almost quadruple the reserves of global liquids.”

In addition, Iraq passed a critical milestone last year by producing three million barrels a day of crude oil for the first time since before the Persian Gulf War, reaching a high of 3.4 million bbl/d in December. Given its access to vast reserves at low costs, Iraq could play a significant role in the growth of energy supply. Of course, in Iraq there is much geopolitical risk attached to supply.

Even with increased production, there was still not enough oil to meet demand in the beginning of 2013. The EIA estimates a 1.3 million bbl/d average draw-down in global oil stocks for January and February.

There are numerous uncertainties as we move forward including the rate of technology advancements, geopolitical risk in many energy rich nations, growth in demand as the world continues its economic recovery, etc. Perhaps the only certainty is continued volatility and the need for oil trading risk management software to manage the volatility.

As Jim Rogers, Chairman, President, and CEO of Duke Energy has been known to express in speeches, “Ben Franklin said there are two certainties in life: death and taxes. To that, I would add the price volatility of natural gas.”

Who doesn’t love cereal? Sometimes it’s my three square meals for the day, and a midnight snack. The cereal aisle is my favorite destination at the supermarket, as I’m sure it is for many of you as well.

Supermarkets offer an assortment of cereals. There are the sugary and fruity cereals for the kids, and let’s face it, some adults too. And for the responsible adults, there are the organic, healthy, and high fiber cereals. The cereal industry is enormous and ever-changing due to the volatile nature of the commodities that are used. The primary ingredients of cereal consist of grains, sugar, cocoa, sweeteners, and other additives like vitamins and minerals.

The world agricultural markets have experienced volatility brought about by several factors including poor harvests, sustained demand, increased use of agricultural products for fuel, and possibly the increase in speculative trading. Consumer Products (CP) companies in particular have seen com­modities become a much larger and more volatile part of their cost structure.

By implementing a fully integrated, scalable, end-to-end approach to commodity management, organizations improve real-time visibility into enterprise market risk and are able to move in and out of positions more quickly. This is why notable CP companies use Triple Point’s Commodity Management software. Learn More.

Triple Point officially opened its Latin American headquarters in Rio de Janeiro this week with a special reception hosting Vale, NORSUL, and other leading companies that rely on Triple Point’s Commodity Management solutions.

The new office enables Triple Point to service its rapidly growing customer base throughout the region. Latin America has always been an important market to Triple Point, with Petrobras becoming a customer back in 2000.

The Latin American economy is very commodity-driven because of rich natural resources including coffee, sugar, oil, and iron ore. The Brazilian economy in particular is the largest in the region, and the country is also one of the world’s largest commodity exporters.

In recent years, the commodity markets have become very volatile, with companies struggling to mitigate exposure to market swings. Because of these conditions, effective risk management is more important than ever, and Triple Point has seen interest in its commodity trading and risk management (CTRM) solutions increase significantly throughout Latin America.